Unloved Stocks Ready to Shine

Think of investor sentiment as a pendulum that swings in tandem with a company's share price. When investors begin to think highly of your company, its stock might also start heading in the right direction. Alas, you can rarely tell when investors are warming to a stock until after it's made that upward swing.

An astrolabe for investors
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 120,000-plus members, offer a great way to monitor investor sentiment. Like astronomers scanning the skies, investors can follow a stock's stars through its CAPS rating trend, tracking investor sentiment to help determine the best time to invest. Data suggests that CAPS' highest-rated stocks performed best, while the lowest-rated did worst. Let's look at companies whose ratings have recently risen from the one- or two-star doldrums, and see whether the stars truly are aligning in their favor.

Source: Motley Fool CAPS, Yahoo! Finance.

Obviously, this is not a list of stocks to buy -- just a starting point for further research. Yet if some of the best investing minds are taking notice of these stocks, maybe we should, too.

The sun's always shining somewhere
Trucking company YRC Worldwide is struggling in the current climate, so it's seeking a distressed purchase of all of its publicly traded outstanding debt. Ratings agency Moody's (NYSE:MCO) suggests that move will be problematic, since YRC will then have to refinance it in a few years. Still, CAPS member teamsterjoe finds a lot to like in YRC's management:

Because the upper management at Yellow Freight is top notch. The number one concern at Yellow is the labor cost. They have asked for concessions from the Teamsters and the Teamsters have tentatively agreed but the membership will never agree to a direct pay cut. Although they may agree to an ESOP with a laid-off employee relief fund. Which means Yellow will have to do everything they can to get the price of their stock up just like they did to get the price of their stock down to get the Teamsters to the table. Yellow is one of the most under valued stock in the Fortune 500.... What people don't realize and what gets by investors is Yellow's business dealings with DHL and the fact that DHL left the United States and LTL business went to Yellow.... Yellow is a top notch company with a good track record.

Although it hasn't gotten the same attention on this side of the pond, Great Britain has been engaged in a series of maneuvers to bolster its financial system as well. Its government has taken an equity stake in Royal Bank of Scotland, and agreed to buy up any shares of Lloyds TSB (NYSE:LYG) and HBOS that those companies could not sell under the U.K.'s bailout plan.

Much like the bailouts orchestrated here, there's a certain national reputation on the line in preventing these institutions from going under, particularly once assistance has been funneled to them. CAPS member getrichdietrying figures that since the U.K. government now owns RBS, it won't allow it to fail:

It's at below 20, [government basically] owns it. The Gas station company I work at has [Royal Bank of Scotland] for all their transactions. The government will not let it fail, and that's why they are buying. I own all the stocks I rate.

Shine your starlight
Are these stocks shining brightly, or ready to burn out? To find out, start your research with Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Then weigh in with your own thoughts on which stocks you think are shooting stars or supernovas. It's free to sign up and post your thoughts, so why not use this opportunity to take your star turn?